What excuses will Carney give for the current moves in inflation?

I think we all know the main answer that will be given to the question above. Energy prices and the pound will be given the blame for the state of inflation.

The problem the BOE has is that it's never in control of inflation. It wasn't when the pound was trading at 1.70, and when oil was over $100.

The difference between the UK and Europe is that we've been seeing inflation rising for much longer than in Europe.

UK & EZ inflation

Where the Eurozone core number is languishing at 0.9%, ours is at 1.6%. We already have some inflation filtering through from the volatile components, what the ECB classes as "second round" effects.

That's why the BOE threw up their "tolerance" comments. They know that if this trend in inflation continues, they will have to act to try and keep these second round effects in control but even that's a near hopeless task because we are a such a heavy importer of things like energy, and the feed through is often very quick, especially when prices are going up.

For today, expect the BOE to be questioned more on where exactly their tolerance levels are. The higher CPI goes, the more the market will try and squeeze the BOE for more details.

The inflation report is just an excuse to have an MPC press conference but it will be interesting to see exactly whether the BOE will revise its inflation forecasts and by how much. The last report pegged inflation at 2.72% for a year's time. At the rate things are going now, that might only be a few months away.

Much like the ECB, the BOE are heading for a tight corner. If they are not ready to hike on the economy alone, then they're going to be very worried about raising rates just on inflation.

For this meeting, it's likely to be about Carney buying some time before acknowledging that they will have to talk about hikes, so expect some can kicking. I expect they'll try and punt things to the summer or further but any reference to the possibility of something happening in the spring will be taken as hawkish by pound traders and the quid will rise strongly. Summer or further will see the pound lower but that will be going against the recent trend, and that might be tempting for dip buyers.

Again, like the ECB, the BOE are trying to keep a lid on the genie bottle of rate hikes, while the market watches the lines on the inflation charts move higher. At some point something will give, and that will either be inflation falling back or central banks hiking. Given the history of central banks inflation battles, it's probably safe to assume which will win out ;-)

Right now, pound traders are perhaps getting a little anxious and so are taking some money off the table ahead of the announcement at 12.00. Cable has just traded down to 1.2636 after the 1.2706 highs earlier. Considering where we've come from over the last day or so, that's to be expected.

As always, you can watch the BOE presser live here from 12.30 GMT.

Has Carney got his punting boots on?